Retirement plans used to be simple. A company you worked for would put in a little bit and you would put in some and when you retired, you were secure. Life was simple. Then things changed and got complicated. Investing in retirement became confusing when different products were offered by investment companies and banks. You want to have a secure future but don’t necessarily want to deal with the hassle of all of the various investment options. What do you do? You consider a simplified employee pension plan for you and your employees.
Who Benefits from a Simplified Employee Pension Plan?
The employees, as well as the employer, benefit the most from the simplified employee pension plan. There are some rules, but they are easy. An employee must be at least 21 years old, made a minimum of $600 and have worked at least three out of five years for the same employer making the contribution.
Win for Both Employees and Employers
A simplified employee pension plan is a win for both employees and employers because the employer is able to put up to 25 percent of the employee’s income into the plan. The maximum amount an employer can contribute is $55,000.
Can I Borrow or Withdraw Funds from My Simplified Employee Pension Plan?
Unfortunately, no, you can’t withdraw funds without paying a penalty of 10 percent for the early withdrawal. If you do so prior to age 59 ½, you will be subject to the 10 percent penalty and have to pay the income taxes on the amount withdrawn. While you can’t borrow from your simplified employee pension plan, you can roll assets from one retirement account into your SEP.
To learn more about how a simplified employee pension plan can fund your employees’ retirement, visit Mountain West IRA.
